As Global Recession Threatens, China Pulls Back on Environmental Efforts

SHANGHAI -- In February, the Fuan textile factory became one of the first major casualties of China's anti-pollution campaign when the multimillion-dollar company was shut down for dumping waste from dyes into a neighboring river and turning it red.

But as the country's economy began to cool this fall and job losses mounted, the company was resurrected. Encouraged by the government, Fuan changed its name, moved to a new location and quietly reopened.

With the global economy at the edge of recession, China appears to be turning away from previous pledges to improve its record on environmental protection. In this, China is hardly alone: A climate-change proposal in Europe that a few months ago seemed like a sure thing has now divided the continent because of its anticipated expense, and worldwide, money for the development of renewable energy sources has been drying up.

But the impact of China's pullback from environmental protection efforts could be the most far-reaching. Home to some of the planet's most polluted cities, China last year hit a dubious milestone: It surpassed the United States to become the world's largest emitter of greenhouse gases. Its factories release so much toxic waste that they have created black clouds thousands of miles away. Its waterways are no better off -- poisoned with industrial runoff ranging from arsenic to acid.

Premier Wen Jiabao had vowed to move China's economy away from its dependence on environmentally harmful manufacturing industries such as paper, chemicals and textiles. Instead, he said, he hoped to build an innovation economy that would make breakthroughs in computing, biotech and other sciences. His effort to spur the development of cleaner businesses while cracking down on polluters appeared to gain momentum in the run-up to the 2008 Olympic Games in Beijing.

While Wen's initiative has been applauded by environmentalists, it now seems ill-timed from an economic standpoint. With unemployed workers taking to the streets in protest, it also poses a political challenge for the Communist Party.

"With the poor economic situation, officials are thinking twice about whether to close polluting factories, whether the benefits to the environment really outweigh the dangers to social stability," said Peng Peng, research director of the Guangzhou Academy of Social Sciences, a government-affiliated think tank.

During China's environmental push, thousands of companies that could not meet pollution standards were shuttered, leaving millions of workers jobless. Those companies able to remain open -- already under pressure from a new labor law, the falling dollar, increased costs for raw materials and a scarcity of loans -- had to bear the additional cost of mandatory environmental upgrades, or face fines.

For the past two years, Guangdong province, the country's richest and the cradle for China's export manufacturing industry, was among the most enthusiastic supporters of China's anti-pollution campaign. Now academics, company representatives and industry associations say that it may be pulling back.

Eddie Leung, president of the Hong Kong Chamber of Commerce in China and owner of a watch factory on the mainland, said Guangdong officials as recently as several months ago strictly enforced environmental regulations. Now it is not uncommon for them to look the other way. "They relaxed the enforcement this year," he said.

Budget priorities also appear to be changing. Money is increasingly needed to pay the salaries of workers whose companies have gone bankrupt and to provide social services to the rural poor, who are having trouble selling their crops. There has been less money left over for environmental initiatives.

As a result, plans to build a state-of-the-art, automatic wastewater and air-testing system for factories in Guangdong's provincial capital are now on hold.